4 minute read
Case studies
Client circumstances:
Our clients had recently purchased a former community hall which they had started to convert into a three-bedroom home for themselves. They had previously renovated a property, which had sold for a substantial profit and had allowed them to utilise the equity for the outright purchase of the community hall and its initial works. Planning permission had been granted and the refurb had already begun but, with their allocated funds for the project running low, a short-term fix was needed to complete the conversion. Outstanding works included, among other things, the installation of a staircase, preparation of some internal wall finishes, the plumbing and electrical second fix, and decoration and snagging throughout. Unable to secure high-street finance due to the property’s change of purpose, and keen to ensure the project schedule was not interrupted, their broker contacted our regulated division straight away. MT Finance solution:
Understanding the need to prevent any interruption to the works, we worked quickly to issue a heavy refurb regulated bridging loan of £143,000 at circa 50% of the property’s OMV of £284,500. Interest was retained at 0.75% over a 12-month term. As the works continue, the market value of the property will rise, with the valuer predicting it to have a GDV of £446,000 once the renovation is complete.
The benefits:
Our regulated heavy refurb bridging loan ensured that the clients had the funds they needed to convert the community hall into their new three-bedroom home without facing any delays. With the property’s value projected to increase by over £160,000 once the works are complete, the clients can look to exit our bridging loan with a high-street mortgage based on their home’s new OMV. If this happens before the end of their 12-month term, they won’t face any ERCs or exit fees by using MT Finance. “The project was ambitious due to the scale of the conversion and the works needed to turn it from a large hall into a three-bedroom home. It was vital that funds could be provided as soon as possible to ensure the works could continue as planned. Teamwork was particularly important, and all those involved really pulled together to get this over the finish line as quickly as possible.” — Raphael Benggio, head of regulated underwriting.
UNREGULATED HEAVY REFURB: COMMERCIAL AUCTION PURCHASE Client circumstances:
Our client is a property development company which was the winning bidder on a former department store valued at £750,000. It initially needed £375,000 to complete the investment purchase with further drawdowns going towards substantial works, which included modernisation of the property, the removal of asbestos, and the building of eight new residential apartments on top of a commercial ground floor. It was scheduled to start after planning permission had been granted. As the property had been purchased via auction, the client needed to secure a short-term fix extremely quickly to ensure it didn’t lose its 10% deposit—or the property. This is when its broker contacted us.
MT Finance solution:
We issued a heavy refurb further advance capped at a total of £375,000—50% of the property’s value— which equates from each of the valuations that were undertaken prior to the drawdown. Interest was retained at 0.75% over a 12-month term. We also discovered that a portion of the client’s planned renovations were covered by PDR, meaning some works could continue while they awaited additional planning permission. As securing this was a condition for further drawdowns, the fact that not all works needed this dramatically sped up the process for some of the extra tranches. Planning permission for the full project has now been granted, enabling the clients to request up to four further drawdowns as the works progress, which—combined with the first tranche—can total up to £875,000. Each request for further funds will be based on the property’s value at that specific time and is subject to the LTV on total borrowing not exceeding 50%, with a 50% cap on the GDV. As the works continue, the market value will increase, allowing for further borrowing.
The benefits:
Our bridging loan ensured that the client purchased the investment property before the deadline, securing the purchase and saving its deposit. The works it will undertake will increase the property’s value, as well as make it more attractive to high-street lenders. This will enable the client to refinance our bridging loan with a traditional BTL mortgage based on the property’s higher value. As with all our loans, it won’t face any fees or penalties if they achieve this before the agreed 12-month term. Once the works are complete, the client will have a new multi-unit property in its portfolio, which it expects to generate an estimated £162,000 in rental income per year. “The borrower required a fast-paced option to hit its deadline which, thanks to everyone’s hard work, we were able to hit. The discovery that some of its refurb plans fell under the PDR criteria meant it didn’t need to apply for planning permission for the full project, enabling us to release further tranches to the client quicker. Planning permission has now been granted and the borrower is continuing with the works on the residential units and, in the interim, is looking to secure tenants for the commercial part of the property.” — Lucy Betts, junior underwriter at MT Finance.
